In nowadays business scenario, shopping vouchers/ Gift vouchers/ discount vouchers is a very common thing. Under GST, issuing such vouchers is treated as a taxable transaction. Whenever a business entity issues a voucher to its customer, it will have to pay GST at the rate as applicable. In this article, we would discuss the implication of GST on issue of vouchers.
What are 'Vouchers' in relation to GST?
Section 2(118) of the CGST Act, defines “Voucher” as: -
- an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and
- where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument.
In simple terms, Voucher is a simple printed piece of paper which entitles its holder to a discount or that may be exchanged for goods or services.
Are vouchers taxable under GST?
The answer to this question is 'Yes'. The CGST Act, 2017 provides specific provisions for the manner the tax shall be levied upon the vouchers.
When to charge GST on Vouchers?
Time of Supply in case of supply of vouchers:- GST on vouchers is to be charged at the time of supply of such vouchers. For this purpose, we can classify the vouchers into two types:-
(a) Single Purpose Voucher: - Where the voucher is issued to customer and the goods/ services against which it can be redeemed is identifiable. For example: - A voucher of Rs. 5000 issued for purchase of LCD anytime within 3 months of its issuance. In case the supply is identifiable, the ‘Time of Supply’ shall be the date of issue of voucher.
(b) General Purpose Voucher: - Where the voucher is issued to customer which can be used for multiple purposes (not identifiable at the time of issuance). For example: - A retail store issued a gift voucher of Rs. 1000 to customer against which he could buy any item from the store within 4 months. In case the supply is non-identifiable, the ‘Time of Supply’ shall be the date of redemption of voucher.
Rate of GST on vouchers
The rate of GST on vouchers shall be the rate as applicable to goods or services in relation to which the same has been issued/ redeemed.
What will be the Value of supply of voucher?
The value of supply of a voucher shall be the redemption value of such voucher. For example: Ram purchased a food voucher of Rs. 1000 from Mcdonalds at Rs. 900. The said voucher entitles the holder to buy any food items from Mcdonalds worth Rs. 1000. Therefore, the value of supply of such voucher shall be Rs. 1,000 despite the fact that Rs. 900 has been paid by Ram for the same. Hence, Mcdonalds shall pay GST on a value of Rs. 1,000 at the rates as applicable.
Read Article on Time of Supply of Goods:- https://www.taxwink.com/blog/time-of-supply-of-goods-under-gst
